NEW YORK (CNN/Money) -
The U.S. State Department has tapped Bechtel Corp. to be the primary contractor to rebuild Iraq's infrastructure, giving it a contract that could be worth up to $680 million, the department said Thursday.

San Francisco-based Bechtel, a private corporation, whose board includes former Secretary of State George Shultz, will do the initial work of rebuilding the "vital elements of Iraq's infrastructure," including power facilities, electrical grids, municipal water and sewage systems.

"Restoration of the country's key infrastructure is a priority of the U.S. government's effort to strengthen Iraq's economy and ensure delivery of essential public services to the Iraqi population," the U.S. Agency for International Development (USAID), the State Department agency handling the first stages of Iraq's rebuilding, said in a press release.

The first phase of the work will be worth $34.6 million, though the contract provides for funding of up to $680 million in the next 18 months, "subject to Congressional authority and availability," the USAID said. It's by far the largest of eight contracts USAID will award during the first stages of Iraq's reconstruction.

"Bechtel is honored to have been asked by USAID to help bring humanitarian assistance, economic recovery and infrastructure reconstruction to the Iraqi people," Tom Hash, President of Bechtel National, Inc., said in a release.

Halliburton has said it hopes to win subcontracting work, and the USAID said subcontractors would work on "a number" of Bechtel's tasks under the contract. Halliburton did not return calls seeking comment.

The USAID also said Bechtel should "engage the Iraqi population" and "work to build local capacity." When USAID issued contracts to rebuild Kosovo in the late 1990s, it required that many of the subcontractors be local. It's still not clear how deeply Iraqi companies and citizens will be involved in Iraq's rebuilding.

Bechtel's contract includes repairing airports and helping Seattle-based private company Stevedoring Services of America -- which won a $4.8 million contract from USAID last month -- repair the port of Umm Qasr.

Halliburton, Washington Group and Fluor have already won contracts from the U.S. Army Corps of Engineers to perform other work in and around Iraq. Halliburton has won a contract, which could be worth $7 billion and could last up to two years, to make emergency repairs to Iraq's oil infrastructure.

Iraqi oil -- which is practically the only commodity or good the nation exports -- will be critical not only to rebuilding Iraq but to helping provide humanitarian relief and pay for war damages.

Other private companies have also won USAID contracts for work in Iraq. International Resources Group, a private firm in Washington, D.C., will get $7 million for personnel support. Creative Associates International Inc., another private firm in Washington, D.C., won a $2 million contract for education services. And Research Triangle Institute, a private firm in Raleigh/Durham, N.C., won a $7.9 million contract to rebuild local governance.

The awarding of these rebuilding contracts has been fraught with political and international controversy. Halliburton's Army contract was awarded without competitive bidding, leading Reps. Henry Waxman (D-Fla.) and John Dingell (D-Mich.) to call for an investigation of the award process.

The Army has said the contract needed to be awarded quickly and in secrecy for reasons of security and expediency and that a new contract, subject to a competitive bidding process, will soon be awarded to complete Halliburton's work.

Other critics have cited the political donations and connections of many of the companies involved in the bidding -- Bechtel's CEO, Riley P. Bechtel, was recently named to President Bush's Export Council, an advisory committee on international trade, for example -- and accused the Bush administration of favoritism.

In response, U.S. officials have noted that Bechtel and the other companies involved in the bidding are perfectly suited for the work, having a long history of experience in conducting major construction projects around the world.

Other countries fear they're going to miss out on the lucrative job of rebuilding Iraq -- which could cost up to $200 billion, according to some estimates -- and are insisting that the United States allow the United Nations to take control of the work. That controversy has not yet been settled.